Getting Out of Bad Debt to Being a Developer in One Week
Before kicking off our 7-day financial freedom challenge with Lawton Hopwood, I sat down with him to know where he stood financially. “Do you have money to invest?” I asked him. To which he answered, “No.” You see, at the time of this interview, Lawton was basically trying to keep his head above water by selling one deal a month. And he wasn't even making the full £3,000 sourcing fee; he was only getting half because he was co-sourcing deals.
Since being made redundant, Lawton had also amassed a £4,500 debt in overdrafts and credit card debt. And his creditors had already started calling, asking to confirm his address. So long story short, Lawton was not in a good place financially, which can be very stressful for a family man. We, therefore, embarked on a financial freedom challenge to help Lawton become debt-free and put him in a better position to support his wife and son.
We were pumped and excited for the first day of finding potential rent-to-rent properties, but to our disappointment, Manchester estate agents wouldn't give us the time of day. So we only got our first viewing the following day after Lawton lied to the agent that he was looking for a rental for himself rather than a rent-to-rent. “That's a bad move, bro,” I told him. “I know, but … we couldn't get in anywhere yesterday, and I'm just excited to view a property and just spend some time with an agent,” he said in response.
The letting agent did show us the apartment, during which time Lawton inquired whether they also deal in corporate lets. “It's not something we do at the moment,” she answered. And since she didn't appreciate her conversation with Lawton getting filmed, the interaction was brief hence not as informative as Lawton had hoped. “How do you think that went?” I asked him. “Really bad,” he said.
Manchester, in a nutshell, was proving difficult to find rent-to-rents. “When you ring, they (agents) don't answer. When you go in, they're rude.” The one-week financial freedom challenge was looking like it was over before it even began. We needed to restrategize. “So what do you want to do?” I asked Lawton. And in what ended up being an emotional conversation, he revealed he had no idea what to do next. Seeing him in an “I give up” state was difficult for me, even bringing me to tears.
Alistair swooped in with some words of encouragement to our boy Lawton via phone call, telling him how he was also once in debt. And instead of stressing about it, he should focus on what will generate money. In his words, “when you worry about stuff, you just manifest it, and it just grows.” Alistair proceeded to ask Lawton what the worst-case scenario would be, to which he answered his creditors showing up at his door. “They're not allowed to, not during COVID-19,” he reminded him.
At this point, I mentioned to Alistair that we had two deals, which if we managed to sell, Lawton would be out of debt. “Speak to some investors, send me the deals. I'll send them out to my mailing list now,” he suggested, concluding the call. I then turned to Lawton, whom I noticed at one point had become a little bit emotional when Alistair was talking, and I was curious to know what was going on in his head.
Lawton revealed that the whole experience was quite frankly emotional, not to mention the pressure that comes with it. Therefore, having someone remind you to “suck it up and just carry on” is vital to the process. “Most people don't talk about that … I don't think I ever spoke about it as much to anybody except for you,” he said, “I don't want anybody to know.” “When you were made redundant, did you have savings?” I further inquired. “No,” he told me, “I've never had savings.”
Lawton was basically living paycheck to paycheck, so when he faced an unexpected redundancy, “it was like that platform that you stood upon all the time, had just been … pulled.” So if worse came to worst and he lost his house, would that ruin his life? “No, but I don't want Mason to see it.” Lawton's biggest motivation was his son. So after finding he had been made redundant, he decided to learn a new skill during the lockdown, ergo his entry into the property world.
“Any luck?” Alistair messaged later that night, seeking an update. And upon looking at Lawton's phone, he had several messages and missed calls from investors wanting to buy the two deals off him! “And they're not saying I'm interested. They're saying I want to reserve it,” I added. Not surprisingly, Lawton was overwhelmed with emotions, “I've never cried so much,” he said as he burst out laughing. “Congratulations,” I said to him while giving him a big hug. “Mate, I so appreciate you being here,” he said in return.
We appeared to be back on track and felt more hopeful about Lawton achieving financial freedom. So the following day saw us visiting different properties and returning calls to potential investors, one of whom was Jimmy. We were on the phone with Jimmy as we drove to one of the properties when someone rear-ended us! And he/she didn't even have the courtesy to stop, imagine that.
But we weren't going to allow that to sidetrack us. The agent met us at the house, which we liked as an HMO investment because:
- It was an off-market property
- It's in a great location
- With a buying price of £95,000, it will likely result in a high Return on Investment (ROI)
And according to the agent, if we refurbished it and restored it to a good condition, it would “go pretty much straight away.” And not just to students, but professionals as well. “Well, let's um see if we can find an investor for it, yeah?” I turned to Lawton. We then thanked the agent for her time, “We really appreciate it,” and drove to the next viewing.
Upon arriving at the second property, Lawton was seemingly impressed, “This one is good … this is probably one of the biggest ones.” “This is like a BRRR HMO,” I added. BRRR stands for buy, rehab, refinance, and rent. Having viewed the entire property, we established we could convert the house into a 4-room HMO. And here's a breakdown of the math:
- Buying price: £125,000, possibly £110,000
- Estimated worth after refurbishing: at least £140,000
- Estimated profit: at least £15,000
Back in his house, Lawton gave me some surprising great news. “You know that property we've just seen, that HMO? I sold it!” he said, “£3,500.” “You're kidding,” I was shocked and impressed, “Who did you sell it to?” “It's an investor I've been speaking to for the past couple of days,” he revealed. And then it hit me, the bungalow we had also seen was almost a done deal, from which he would make another £3,500.
“You're pretty much debt-free now, bro,” I said as we both burst out in laughter. And shortly after, it was all confirmed. Lawton walked into the living room and held up his phone, saying “Just got a text on my phone, seven bags in the bank.” “Why don't you just pay off your debt now then,” I suggested. “I'll do it now,” he said. “How do you feel?” I went on to ask. “Buzzing … like I don't really think it's hit me … I've never seen so many zeroes,” he said, and the laughter of joy continued.
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